Bank Owned Real Estate (REO)

Bank owned real estate, mainly homes that went through foreclosure, are referred to as REO (Real Estate Owned) property.

Bank lists foreclosed properties on MLS or other Realtor platform.

These were sold at the Sheriff's auction and bought by the bank/lender/mortgage holder at the auction.

Nobody outbid the bank.

These are different from "HUD Homes," which are discussed separately.

These are also different from "Tax Sales," which are also discusses separately.

Bank owned real estate will be vacant, and often will not have utility service.

Bank owned real estate (REO) properties commonly have damage associated with freezing, such as broken pipes, and also vandalism. The REO property will be listed with a REO agent -- a real estate agent who works for the Bank.

The REO agent will list the property and sometimes take care of the inside and outside appearance of the property in order to sell it for more money.

A REO agent works for the bank, and is supposed to get the best result for the bank.

You will want to get your own agent to help you locate and buy a home, one who will try to get the best result for you, rather than for the bank.

You will not get any discount on a home purchase by using the REO listing agent as your buying agent also.

It would be a violation of the REO agent's responsibilities to the bank, if the REO agent gives you information about the bank's procedures, if that information helps you to get a lower price for example.

Using your own agent will help you to avoid that kind of conflict.
A professional agent experienced in dealing with REO properties and banks can tell you what you need to know, without restrictions.

Banks mostly sell REO properties as soon as they get them. The banks have "in-house" procedures for adjusting the price of the houses.

Usually the procedure is to list the house for a little more than the appraised value, or the bank's cost. Then, every
couple of weeks or so, the bank will lower the price until it sells.

Some people refer to this process as a "hot potato game". On every property that a bank gets through foreclosure, a lot of money has already been lost on lawyers, State filing fees, Court fees, eviction fees, physical damage, and market fluctuations.

Bank owned real estate (REO) is like any other listed property. There are real estate professionals who can help you to look at the property and make an offer to buy the property if you like it.

Banks seem to love cash. That is because many REO properties need repairs, and will not easily qualify for financing. For this reason, some REO listings say that they are only available to cash buyers.
Of course, the owner bank will not tell you what the problems are with the house.

They sell them "AS IS," with no disclosures regarding the condition of the house. The bank does not want to have any liability for failing to accurately disclose the condition of the property, so the bank makes no disclosures at all.

Plan to pay for a professional inspection of any bank owned real estate you want to buy, so that you will know what problems the house/property comes with. You schedule the inspection after the bank accepts your purchase offer, but before your right to cancel the contract expires.

If there are multiple offers to purchase a bank owned property, the REO agent will ask your realtor to submit their "highest and best bid."

This is a way of saying that there is competition in the bidding for the house. Sometimes they have a "Multiple offers addendum," meaning that you will have to acknowledge that you are not the only one bidder, and that you might not be the highest bidder. Such an addendum is meant to protect the bank from law suits.

Foreclosed homes are listed for sale on the MLS and can be accessed by licensed Realtor.

Real Estate Professional can set up an automatic search for all the new bank foreclosure homes, and email the listings to you automatically on a daily basis.

You can select an area that you like, the price range that you can afford, and other conditions.